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Thursday, May 8, 2008

This post is the third in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I describe how this strategy could transform the health sector in emerging economies.

Last Mile Health Care DeliveryTalk to people in the rural communities of southern Mexico, in the new urban communities on the southern edge of Bogota, or in almost any village in rural Africa about getting decent access to healthcare, and their answer is the same: it usually costs more to get to a clinic, a doctor's office, even a pharmacy, than the cost of the service itself. In Bogota, most of the government-supported health services are in the north of the city, such that it can cost people in these new refugee communities a day's work plus bus fare across town and back to get help. Lack of access defines part of the last mile health care dilemma, and that means distributional business models, such as franchising, can be important.

Talk to Health Stores in Kenya, an enterprise trying to staff small pharmacies with nurses, and another part of the problem becomes clear: the sheer lack of doctors, nurses, and pharmacists in emerging markets. There are not anywhere close to the number of skilled professionals needed to cover rural areas, and these health workers overwhelmingly refuse to live either in rural areas or in urban slums. So technologies, organizational models, and legal changes that enable local diagnosis and remote practice by doctors and pharmacists could play a critical role.

Still a third factor leaps out from the data in The Next 4 Billion report that shows clearly that low-income households spend between a third and a half of their out-of-pocket health care expenditures on drugs. They typically don't go to doctors or clinics or hospitals, but rather to pharmacies or some other source of medicines and seek to self-medicate. That means they often get a guess as to what's wrong with them instead of a diagnosis.

Compounding the problem are informal supply chains in many countries that sometimes provide poor quality, fake or simply expensive medicines. In the Philippines, for example, many rural people often buy drugs from a convenience store at two to three times the pharmacy price. So building a disciplined pharmaceutical supply chain that extends to most communities could help with quality and access. With onsite diagnosis and remote practice tools, it could also become a key piece of the missing infrastructure for last mile health care delivery.

Taking Good Intentions To Scale

As it happens, there are at least four instances of a franchise pharmacy model-in Kenya, Ghana, Mexico, and one state in India--that could address these problems. None of them have yet scaled, and none of them have put all the pieces together, but they show interesting strengths. As franchises, they can expand with modest capital investment, can enlist local business talent who know the communities to be served, and can use surprise audits, secret shoppers, and other well-established approaches to ensure a disciplined supply chain with no fake drugs; so part of the value proposition (and the brand) is "drugs that work."

Selling mostly or exclusively locally-produced generic medicines, these franchise pharmacies can often be the low-cost provider. Because they typically focus on the most common healthcare problems, they stock a modest range of medicines, preventive commodities, reading glasses, and similar goods - making it easier to push distribution out to more remote communities.

With an IT logistics system (deployed in Mexico, not in the others), they can ensure that they never run short of the medicines most people need-another part of value proposition. What makes such distribution platforms potentially even more valuable, however, is the advent of new diagnostic tools designed for the BOP; these include a DNA-based diagnostic tool that can detect the major fever diseases and STDs, for example. These new diagnostic tools are inexpensive, do not require electric power or refrigeration and can be operated by para-professionals, feature color-coded readouts, and give results in a few minutes at a cost of perhaps $.50 per test. Paired with a franchise pharmacy, they offer much improved targeting of medicines and, presumably, better health outcomes - as well as another line of business for the pharmacy unit.

As remote practice tools and services expand, the pharmacy platform, especially with an IT connection, may prove even more valuable, enabling not just remote supervision of the local unit by a licensed pharmacist or doctor, but also a simple x-ray or sonogram taken locally to be read at a central hospital or radiology practice while the customer waits. They would then know whether rest and medicine would take care of the problem, or a trip to a doctor or hospital is required. GE has already launched a new, portable electrocardiograph that weighs just three pounds. Add cataract screening, monitoring basic vital signs, infectious disease surveillance, and the result could be a transformation of rural health care.

At a national scale, these franchise pharmacy chains can be sizeable, profitable, businesses that create local jobs and wealth. And there is ample opportunity to replicate the model in many countries.

In my next post, I will summarize common links between the two seemingly disparate business models in the health and ICT sectors that I have discussed here and in my previous post, identifying the common business DNA that makes for a transformative sector solution.